Gold delivery on MCX hits highest since April last year

SummaryGold delivery on the Multi-Commodity Exchange (MCX) platform against the August contract hit the highest since April last year, in a welcome change for the country's largest commodity bourse hit by a transaction tax on non-farm futures and a settlement crisis at a group firm.

Gold delivery on the Multi-Commodity Exchange (MCX) platform against the August contract hit the highest since April last year, in a welcome change for the country's largest commodity bourse hit by a transaction tax on non-farm futures and a settlement crisis at a group firm.

MCX witnessed the delivery of 1,159 kg of gold against the August contract, the highest since that of 1,388 kg in April 2013, and sharply higher than that of just 4 kg in February this year. Importantly, this was the first time that delivery has crossed the 1000-kg level after a 0.01% transaction tax was imposed by the government on non-farm futures in July last year. With the imposition of the tax on the seller, the costs of trading on the MCX platform have more than tripled from R1.60 on a transaction value of R1,00,000 in June 2013.

Moreover, the exchange also suffered a blow following a settlement scandal at National Spot Exchange Ltd. NSEL's owner, Financial Technologies (India), was directed by the regulator to divest its stake in MCX, and the futures exchange's management team, too, saw restructuring. “Such high delivery bears testimony to high hedging interests and hedgers’ faith in the MCX gold contract,” said PK Singhal, executive vice-president of MCX. This comes as a relief for MCX, which primarily deals in bullion, metals and energy products, as the trading value of bullion across exchanges plunged 70% in the April 1-July 15 period from a year before. Exchange executives expect better performance in the coming months.